Over the past few weeks, discussion on the future of interest rates has been widespread following the Fed’s quarterly meeting and again following Brexit. I found the following chart from economist Larry Summers interesting. It graphs the Federal Reserve’s interest rate expectations, by year, and clearly illustrates how consistently wrong the Fed’s interest rate expectations have been. Maybe it’s time to stop predicting higher interest rates?
While changes in interest rates certainly have an impact on how we manage portfolios, most of the questions I receive from clients center on the more practical aspects of lower interest rates -- questions like whether one should pay off their house early, refinance, or accelerate their plans to build or remodel given the low financing rates available. These are all great questions, but like most good questions, they cannot be answered in a vacuum. The answers must be addressed in the context of your overall plan and how option A or B helps you achieve your goals. Certainly low interest rates can help you achieve some of your goals sooner, but if a doubling of mortgage payment inhibits your ability to achieve other more important goals, then the time isn’t right, even if interest rates are low. If you’re in that situation, the good news is that interest rates seem likely to stay low for a while longer.
If you’d like to get a second opinion on your financial plan, how low interest rates affect you, or how to best achieve your goals, feel free to give us a call at 866-794-8066 or email us at
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